• The Art of the Parley

    Deal analysis, by real professionals.

Captain Jack Sparrow calls a Parley, the rest of us negotiate. The fine art of settling our differences and working out deals… They have been labeled good, bad, great, fair, rough, big, real, sweet, raw, dirty, once in a lifetime and of the century. Amateurs judge performance solely by outcome, professionals assess the process. But how can we analyze something as seemingly ephemeral as a good deal?

One of my favorite diagrams is the following. It captures the essence of professionalism in any undertaking.

Most people confuse good performance with good outcome. The two are correlated: good operators tend to produce good results, and bad operators tend to get bad results. That is especially true for repeat performance, when they build up a track record. But for any individual case, bad process can lead to a good outcome (“Dumb Luck”) and good process can result in a bad outcome (“Bad Break”). The diagram is taken from “The success equation”, a book by Michael Mauboussin on the difference between luck and skill and their respective importance in various fields.

If there’s one field people look almost exclusively at outcome, it’s negotiation and deal making. That is peculiar, as there are few undertakings with a wider range and variety of starting conditions. In poker, everybody understands you can’t reasonably expect to win the hand when you don’t start with good cards. But negotiators are somehow expected to always produce an amazing result. Pop culture loves to create and perpetuate an image of negotiators as members of some secret cabal, in the know on the mysterious tricks and incantations to conjure magic out of thin air. Which, most of the time, is not how professional deal makers go about their craft.

If outcome alone doesn’t tell us all that much about deal making performance, how can we tell a great deal from a so-so one? If there is such a thing as proper process and good technique, what are the characteristics, events and behaviors to look for?

You can get a long way examining four things. Here is how you analyze any Parley, the easy way…

First, we need to look at the deal makers: the parties involved in the negotiation. Understanding the agents comes down to analyzing the motivations driving their choices and decisions. What do they hope to accomplish doing a deal? What are their interests and objectives? What metric are they optimizing for? Professional deal makers – be they buyers, sellers, diplomats, or other advocates of some cause – don’t show up randomly, they act with intent and purpose.

Analyzing this can get complicated enough, especially with sophisticated counterparties in a complicated deal. In a complex sale to a large enterprise, for example, the counterparty is typically not just one person but an entire ecosystem of decision makers, stakeholders and influencers. And don’t assume they rationally represent the interests of their company in a sterile, academic sense. They all bring their own personal agenda – openly or covert. Things like career aspirations, personal grudges from the past, financial incentive schemes… all drive human behavior in other ways than the merely rational.

Yet complicated as that can get, this is still the easy part. Most analysts stop here, only making an agentic analysis of what drives people and what they hope to achieve. There is  a second force behind human behavior and decision making. It is often more powerful, and yet usually overlooked. People are driven by their ambitions and desires, but even more so by their constraints and context. To understand deal makers, the key question is not the visible consideration of where they want to move, but the invisible ties that hold them back. Don’t just study what the want, but even more so what they can’t.

Negotiations are shaped by the objectives, but even more by the constraints of the involved agents.

A good way to think through that first step, identifying drivers and constraints, is to frame the negotiation in terms of the alternatives available to the various parties. A powerful question is what each party will do if they can’t reach a deal. That captures what FBI hostage negotiator Chris Voss calls the “Substance” of the negotiation: the various elements for discussion that will ultimately add up to the description of the deal.

The next step in our analysis framework is assessing how the various parties progressed through the negotiation. From start to finish, how did they go about the discussions? This is mostly a negative analysis: the question is whether either party made a major mistake. Voss calls this “Structure” and “Style”. Structure is about what you do and when. Style is about how you do it.

Structure relates to the sequence of actions, the logic behind your moves, and how you set up the conversation. Your counterparty may not have good alternatives if they can’t come to an agreement with you, but that doesn’t mean they will automatically give you everything you want. What you conceal or reveal, what you ask and say, and in which order… it all affects the outcome that will eventually result. One example of a basic negotiation mistake is not making your concessions conditional. If you offer to give something up, make it conditional on getting something in return.

Counterintuitively, constantly arguing your own side and trying to prove your own points is also a structural mistake. Negotiation is not about scoring debate points, it is about reaching an agreement – which implies you’ll have to understand the fears and concerns of the other party. And just like there’s a Pirate Code, there’s also such a thing as a negotiator code. It’s unprofessional to have to walk back or be unable to deliver on what you agree to. Likewise, professionals don’t bluff: they lose all credibility if they can’t follow through on threats they make.

Style refers to the way you deliver your message. Negotiators are still human beings, and your tone of voice, inflection, body language, and overall demeanor may also affect proceedings and outcome. Style is about how you make the other person feel during the negotiation. In most cases, a calm and constructive tone yields the best results. But if a firmer or more abrasive style is called upon, the professional negotiator should be capable of dealing with that too.

Matters of structure and style don’t just relate to your own conduct, but also recognizing (and dealing with) what the other party does. It’s not a given they will play nice, and you’ll have to handle it if they play dirty. After all, even the Pirate Code it’s not hard rules so much as guidelines…

Once we understood the drivers and constraints of both parties, and we examined if they made any major mistakes of technique, we can finally assess the deal itself. Evaluating the quality of deal outcome only makes sense in reference to the alternative outcomes reasonably or possibly available to either party.

The harder aspect is to consider missed opportunities. Imaginary outcomes, in other words. That requires as much creativity from the analyst as the negotiators themselves. A good deal minimally satisfies the requirements of both parties. A great deal maximizes the obtained benefit for both. Amongst professionals, theoretically a deal that does not deliver on the requirements is not possible: they should have walked away. That does not mean, of course, that it’s impossible for one party to end up very satisfied and the other only minimally. Which is not necessarily a zero sum game, and in many cases a lot of side benefit can be obtained. One of the secondary benefits of the Louisiana Purchase to the United States, for example, was that it lent credibility to the young nation as a trustworthy financial credit.

”

Negotiation is not an act of battle; it’s a process of discovery. The goal is to uncover as much information as possible.

”

― Chris Voss (in “Never split the difference: negotiating as if your life depended on it.”)

A final consideration is robustness of execution. It’s one thing to negotiate a deal, but another thing entirely to have the other party actually execute on it. If they don’t follow through or do what they say, where does that leave you and what are you going to do? That too is part of proper deal making.

A negotiation is, at the end of the day, just talk. You can’t control what other people are actually going to do, but you can take precautions. Chris Voss talks about three types of yes’es. The first is a counterfeit yes – the other party only says yes to stop the conversation or get rid of you, but in reality they are still at No. The second is a confirmation yes – basically meaning “yes I heard you” or “yes that’s correct”, but without any real commitment to act yet. The commitment yes is the third type. Here the other party genuinely intends to act and follow through on the deal, and as a result this is the only yes that really matters in negotiation.

The Art of the Parley

Credits

Words

> Stefan Verstraeten

Ideas

> Chris Voss

> Alicia Juarrero – “Context is Everything”

Photo

> Pirates of the Carribean: At World’s End.

> Pirates of the Carribean: The Curse of the Black Pearl.

Video

> Pirates of the Carribean: At World’s End.

> Better Call Saul, Season 1 Episode 2 – “Mijo”

Click here to add your own text